Gold prices are set to fall to a multi-year low as the US Federal Reserve winds back stimulus and contemplates lifting interest rates.
Gold has fallen to its lowest level since January and analysts say the slide is likely to continue, putting a number of Australian gold producers under threat.
The metal has fallen from more than $1,300 an ounce in August to around $1,220 and CMC Markets chief market strategist Michael McCarthy expects it to move towards its multi-year-low of $1,180 within weeks.
And he doesn't expect that level to hold in the longer term.
"With the fundamentals running against it and no sign of inflation, it's hard to see what will hold it and we could be looking at new multi-year lows," he said.
The key factor pushing gold prices up in recent years has been the US Federal Reserve's economic stimulus program, which has pushed the US dollar lower and boosted demand for safe haven investments like gold and bonds.
But the Fed will completely wind back its asset purchases in October and is expected to start lifting interest rates in 2015, which is bad news for gold.
A move below $1,180 would take the metal to a four year low and would send alarm bells across the gold mining sector, Mr McCarthy said.
"Some of the higher cost producers are under threat and if we do see a breach of that $1,180 level it's going to raise concerns across the sector," he said.
His advice to investors is to stay away from the sector entirely until the dust settles.
"From an investment point of view my only advice would be to short the sector, I don't see any reason to hold the sector as part of a balanced portfolio at the moment," he said.
But IG market strategist Evan Lucas says the slide in the gold price is hitting some producers much more than others.
He said while higher cost producers would struggle, low cost producers should thrive.
"Anyone who is pulling gold out of the ground for more than the gold price or has huge debt issues are the ones to watch on the downside," he said.
"The ones that have got cash on the balance sheet and low costs are the ones to watch on the upside."
Gold miners have been under pressure for the past two years, with the price of a metal sliding from around $1,700 a tonne to its current level.
Australia's largest gold miner, Newcrest has seen its share price fall from more than $30 to around $10 over that time and has been working to reign in costs.